Law Commons^™

Markets In Ip And Antitrust, Herbert J. Hovenkamp

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The purpose of market definition in antitrust law is to identify a grouping of sales such that a single firm who controlled them could maintain prices for a significant time at above the competitive level. The conceptions and procedures that go into “market definition” in antitrust can be quite different from those that go into market definition in IP law. When the issue of market definition appears in IP cases, it is mainly as a query about the range over which rivalry occurs. This rivalry may or may not have much to do with a firm’s ability to charge a …

Mergers, Market Dominance And The Lundbeck Case, Herbert J. Hovenkamp

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In Lundbeck the Eighth Circuit affirmed a district court’s judgment that a merger involving the only two drugs approved for treating a serious heart condition in infants was lawful. Although the drugs treated the same condition they were not bioequivalents. The Eighth Circuit approved the district court’s conclusion that they had not been shown to be in the same relevant market.

Most mergers that are subject to challenge under the antitrust laws occur in markets that exhibit some degree of product differentiation. The Lundbeck case illustrates some of the problems that can arise when courts apply ideas derived from models …

Tying Arrangements And Lawful Alternatives: Transaction Costs Considerations, Herbert J. Hovenkamp

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Tying arrangements often increase welfare by promoting product quality and protecting the supplier's goodwill in the tying product. When the tying product works effectively only with ancillary materials or accessories or services of a particular kind or quality, its supplier can assure the requisite quality of the ancillary product only by supplying that product itself. The cost savings defense and the defenses of quality control or good will are the most widely recognized and accepted tying defenses.

One characteristic of manufactured products is differentiation among the offerings of various brands. This in turn produces a need for more specialized provision …

Quasi Exclusive Dealing, Herbert J. Hovenkamp

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A firm's discounting policies over a single product raise concerns analogous to exclusive dealing in two situations. First, the firm may offer conditional discounts structured in such a way as to induce customers to take most of their requirements for a given product from the defendant. In addition, a firm may employ “slotting” fees or similar allowances paid by manufacturers to retailers, with the possible result that rivals have difficulty obtaining access to shelf space. Neither practice is literally "exclusive dealing," because neither involves a condition that the purchaser not deal in the goods of a rival, although they may …

Tying Noncompetitive Goods, Herbert J. Hovenkamp

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Many of the classic tying cases involved tied products that were common staples such as button fasteners, canned ink, dry ice, or salt. These products were sold in competitive markets, presumably at prices very close to cost. For most of them the most likely explanations for the tie were quality control or price discrimination, both with competitively benign results in the great majority of situations. When the tied good is sold in a noncompetitive market, however, an additional consumer welfare enhancing result is likely to obtain – namely, the elimination of double marginalization, which occurs when separate sellers of complementary …

A Preface To Neoclassical Legal Thought, Herbert J. Hovenkamp

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Most legal historians speak of the period following classical legal thought as “progressive legal thought.” That term creates an unwarranted bias in characterization, however, creating the impression that conservatives clung to an obsolete “classical” ideology, when in fact they were in many ways just as revisionist as the progressives legal thinkers whom they critiqued. The Progressives and New Deal thinkers whom we identify with progressive legal thought were nearly all neoclassical, or marginalist, in their economics, but it is hardly true that all marginalists were progressives. For example, the lawyers and policy makers in the corporate finance battles of the …

Tying And The Rule Of Reason: Understanding Leverage, Foreclosure, And Price Discrimination, Herbert J. Hovenkamp

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Many tying arrangements are used by firms that do not have substantial market power in either of the two markets linked together by the tie. Their function must be something other than the enlargement or perpetuation of power. A few ties do involve fairly explicit exercises of market power, but they need not be used for a different purpose than the ties imposed by more competitive firms. This paper considers firms’ use of ties to exploit whatever power they already have over the tying product. The "leverage" theory sees ties as exploiting customers as a group via higher prices, whether …

A Primer On Antitrust Damages, Herbert J. Hovenkamp

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This paper considers the theory of antitrust damages and then discusses some simple models for proving them. Antitrust damages theory begins with the premise that many practices alleged to violate the antitrust laws cause no consumer harm. Others are inefficient and have few socially redeeming virtues. Still others may simultaneously increase both the efficiency of the participants and their market power. A perfectly designed antitrust policy would exonerate the first set of practices, condemn the second set, and condemn the third set only when the social cost of the restraint exceeds its social value or they produce net harm to …

Quantification Of Harm In Private Antitrust Actions In The United States, Herbert J. Hovenkamp

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This paper discusses the theory and experience of United States courts concerning the quantification of harm in antitrust cases. This treatment pertains to both the social cost of antitrust violations, and to the private damage mechanisms that United States antitrust law has developed. It is submitted for the Roundtable on the Quantification of Harm to Competition by National Courts and Competition Agencies, Organization for Economic Cooperation and Development (OECD), Feb., 2011.

In a typical year more than 90% of antitrust complaints filed in the United States are by private plaintiffs rather than the federal government. Further, when the individual states …

Antitrust And Patent Law Analysis Of Pharmaceutical Reverse Payment Settlements, Herbert J. Hovenkamp

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Patent settlements in which the patentee pays the alleged infringer to stay out of the market are largely a consequence of the Hatch-Waxman Act, which was designed to facilitate the entry of generic drugs by providing the first generic producer to challenge a pioneer drug patent with a 180 day period of exclusivity. This period can be extended by a settlement even if the generic is not producing, and in any event all subsequent generic firms are denied the 180 day exclusivity period, significantly reducing their incentive to enter.

The Circuit Courts of Appeal are split three ways over such …

The Political Economy Of Fraud On The Market, William W. Bratton, Michael L. Wachter

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No abstract provided.

Promoting The Buildout Of New Networks Vs. Compelling Access To The Monopoly Loop: A Clash Of Regulatory Paradigms, Christopher S. Yoo

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No abstract provided.

Antitrust And Innovation: Where We Are And Where We Should Be Going, Herbert J. Hovenkamp

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For large parts of their history intellectual property law and antitrust law have worked so as to undermine innovation competition by protecting too much. Antitrust policy often reflected exaggerated fears of competitive harm, and responded by developing overly protective rules that shielded inefficient businesses from competition at the expense of consumers. By the same token, the IP laws have often undermined rather than promoted innovation by granting IP holders rights far beyond what is necessary to create appropriate incentives to innovate.

Perhaps the biggest intellectual change in recent decades is that we have come to see patents less as a …

Reconsidering International Tax Neutrality, Michael S. Knoll

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For decades, U.S. international tax policy has shifted back and forth between territorial-source-exemption taxation and worldwide-residence-credit taxation. The former is generally associated with capital import neutrality (CIN) and the latter with capital export neutrality (CEN). One reason why national tax policy has shifted back and forth between those benchmarks is because it is widely accepted that a tax system cannot simultaneously satisfy both CEN and CIN unless tax rates on capital are harmonized across jurisdictions. In this essay, I argue that the international tax literature contains two different and conflicting definitions for CIN. Under one definition, which goes back at …

Notice And Patent Remedies, Herbert J. Hovenkamp

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In private enforcement systems such as the one for patents, remedies perform the “public” function of determining the optimal amount of protection and deterrence. If every patent were properly granted and had just the right scope to incentivize innovation, then strict enforcement and harsh penalties for infringement would be a good idea. But in a world where too many patents are granted, their boundaries are often ambiguous and scope excessive, things are not so simple. The expected likelihood and magnitude of the penalty determines the number of infringement suits and the litigation resources that will be poured into them. As …

Introduction To Creation Without Restraint: Promoting Liberty And Rivalry In Innovation, Christina Bohannan, Herbert J. Hovenkamp

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This document contains the table of contents, introduction, and a brief description of Christina Bohannan & Herbert Hovenkamp, Creation without Restraint: Promoting Liberty and Rivalry in Innovation (Oxford 2011).

Promoting rivalry in innovation requires a fusion of legal policies drawn from patent, copyright, and antitrust law, as well as economics and other disciplines. Creation Without Restraint looks first at the relationship between markets and innovation, noting that innovation occurs most in moderately competitive markets and that small actors are more likely to be truly creative innovators. Then we examine the problem of connected and complementary relationships, a dominant feature of …